SINGAPORE (Apr 2): Singapore Exchange Regulation (SGX RegCo) on Monday issued Midas Holdings with a notice of compliance, stripping executive chairman Chen Wei Ping (photo) and Ma Ming Zhang, legal representative of Luoyang Midas, from their offices as director or executive officer of the group respectively with immediate effect.

Chen and Ma will also be barred from being appointed director or executive officer in any SGX listed company for a period of three years from Monday.

SGX RegCo said Midas' disclosures and the circumstances surrounding the unauthorised loans and corporate guarantees and undisclosed lawsuits raised immediate and serious concerns about the suitability of Chen and Ma to continue as executive chairman and director of the group respectively.

Recounting the facts, SGX RegCo said Midas and wholly-owned China subsidiaries Jilin Midas Light Alloy Co., Luoyang Midas, Huicheng Capital and Dalian Huicheng had provided corporate guarantees for the RMB 379 million ($79 million) loans taken out by subsidiary Jilin Midas.

SGX Regco said the Jilin Midas loans guarantees were executed on behalf of the subsidiaries by Sun Qi Xiang, legal representative of Jilin Midas Light Alloy; Ma; Chen, who is also the legal representative of Midas and Huicheng Capital; and Yang Xiao Guang, legal representative of Dalian Huicheng.

Midas and Huicheng Capital had also agreed to pledge shares in Dalian Huicheng and Nanjing Puizhen for the Jilin Midas loans.

Jilin Midas and the guarantors, which included Chen, were subsequently sued in China by the Jilin Midas lender.

The regulator said Chen and the legal representatives of the China subsidiaries did not seek approval from the Midas' board of directors for the provision of the Jilin Midas loans guarantees and share pledges nor did they report the lawsuits to the board.

This meant that Midas did not make any announcements relating to the Jilin Midas loans lawsuits and the audit committee could not establish what happened to the proceeds of the Jilin Midas loans.

As for the four loans totalling RMB 30.5 million taken out by Jilin Midas Light Alloy in Sept and Oct 2016, SGX RegCo said the lender, a certain Ms Ning Xiao Fei, did not exist in the group's accounts.

The Jilin Midas Light Alloy were guaranteed by Jilin Midas, Chen, former CEO Patrick Chew and Ms Li Hui, financial controller of Jilin Midas Light Alloy, among others.

"In this regard, the legal representative stamps of Mr Chen Wei Ping and Mr Patrick and Ms Li Hui's signature were found on the loan agreements for the Jilin Midas Light Alloy loans," said the regulator.

Jilin Midas Light Alloy and the guarantors were subsequently sued by the lender for the non-repayment of loans. Again, the relevant parties did not report the loans and lawsuits to the board and these were omitted from Midas' 3Q16 financial statements.

In the final case, the legal representative stamps of Chew and Yang were also used by Luoyang Midas and Dalian Huicheng to separately provide unauthorised guarantee to debts owned to third parties by an unrelated company named Chongqing Huicheng Aluminium Co. which is controlled by LakeForest Capital whose sole shareholder is Chen's nephew Chen Chen. This was again carried out without the board's knowledge.

And when Luoyang Midas and Dalian Huicheng were subsequently sued by the third parties, Ma did not report the unauthorised guarantees lawsuits to the board.

SGX RegCo also noted that Chew had resigned while Sun and Yang have been replaced.